Are you in the reputation economy?

Shopping online is great; instead of traipsing through shop after shop looking for what you want you can get it with one easy click. Yet there is a downside. When you buy something online, say a pair of shoes, you will be bombarded with shoe adverts for the coming weeks. This is because everything you do online leaves a trace.

And it won’t just be your shopping and browsing habits that follow you around. We are entering an age where your entire reputation, including your ability to get a job, will be affected by what you do online. In “The Reputation Economy: How to Optimize Your Digital Footprint in a World Where Your Reputation Is Your Most Valuable Asset”, author Michael Fertik provides some advice on how to learn and prepare for this coming age.

Before the advent of the internet, people had a fair amount of control over how they presented themselves to the world. Today, however, such tight control is a thing of the past.

This change is partially due to the dramatic expansion of our data storage capacities. Previously, only major institutions, such as the CIA, the NSA and IBM, had the resources to store massive amounts of data. Then came the internet, and now anyone can store huge amounts of data for close to zilch.

For individuals, that means that their digital footprint, the trail of data they leave behind after surfing the internet (photos uploaded to Facebook, credit card transactions and ATM withdrawals), will be recorded and permanently stored by a motley of companies.

Furthermore, emerging technologies are making it easier and cheaper to analyze, quantify and draw conclusions from this data. And companies increasingly rely on data-analysis tools to discern patterns in their customers’ behavior.

Amazon, for instance, uses a system called Hadoop to find, among millions upon millions of purchases, patterns that allow them to make customized product recommendations. And LinkedIn uses a similar system to recommend “People You May Know.”

These systems organize the cascades of data via numerical scoring. And at this point, pretty much everything is being processed and scored.

So whatever you do online – each click of your mouse – is represented as a number. And many companies are plugging these numbers into an algorithm that computes a reputation score for individual people.

Pretty soon, reputation scores will be ubiquitous. In other words, whatever you want to do in the future, whether it’s getting a job or buying a house, you’ll first have to reckon with your reputation score – the sum of all your online habits.

Our digital footprint and digital reputation will become more and more relevant as technology improves. What’s more, the information we share online in the future will go public almost instantaneously.

For example, a surprise compliment from your boss on social media will instantly increase your reputation as a good employee. Accordingly, a grouchy Facebook comment will instantly decrease your score.

And with so much information about you being made available to others, companies you’ve had no interactions with may even try to attract you.

Imagine that you’re the kind of person who always stops at the same coffee shop, eats the same dish for lunch on Fridays and purchases cars from the same dealership. Your reputation score will reflect your loyalty, and a gaggle of companies will come calling, eager to win your business.

Your online reputation will affect other parts of your life, too. Take your professional life: What you do today for one company will be used to predict your behavior in other areas tomorrow. For example, if you build a good reputation as an advertiser, that information will automatically be used to predict your aptitude for social media marketing. In other words, your reputation is “portable.”

As you can see, in the reputation economy, people will use data to make decisions even if their information is limited and secondhand. Imagine you want to hire a babysitter: You’ve probably never observed this person babysitting, and, of course, your children are unique and will pose unique challenges. You have no real way of knowing whether the sitter will care ably for your children.

However, with access to the sitter’s reputation score, you’ll have a lot of accurate secondhand information (about previous jobs, about education) that will make the decision easier.

Imagine someone has a grudge against you and your small business. What happens if that person starts spreading lies about you all across the internet? Unfortunately, you can’t program a computer to censor such comments. No matter how advanced technology gets, computers will always lack the ability to distinguish fact from fiction.

And so false or inaccurate information about a company can critically damage its reputation. Imagine a competitor leaving fake negative reviews about your company on Yelp, or paying people to create fake accounts from which to write negative comments. By slowly destroying its reputation, they’d sabotage your company, one fake comment at a time.

Similarly, false or inaccurate information about an individual can crucially damage their professional reputation. Let’s say someone either admires or dislikes you to such an obsessive degree that they start impersonating you online. Using your name, that person might do or say certain things you would never condone, irreversibly tarnishing your reputation.

So, what would you do if you or your business experienced an attack of this kind? How would you minimize the damage? Well, it’s often better to respond indirectly, because publicly refuting an allegation may be more harmful than helpful. Why? Because you might draw more attention to the conflict. Also, you may come across as aggressive or defensive.

An indirect response will allow you to be more careful and rational. For example, if someone posts a blog entry alleging that you were fired – when in truth you resigned voluntarily – then you may be able to prove that allegation false by posting photos of your going-away party or of a warm goodbye letter from your department supervisor.

It’s easy to feel like giving up when your reputation hits a snag. But don’t despair – there’s a way to bounce back. The key is to be proactive. It’s impossible to change what information is being collected about you, but you can control what information people pay attention to. There are a couple ways of doing it.

One way to challenge a negative reputation is to disrupt the conversation by doing something shocking. Instead of defending yourself, simply get people to start talking about something else.

Say you’re tired of being seen as someone who’s lazy and eats poorly. Instead of trying to vindicate your habits, go join a gym. And then bombard your coworkers with photos of your weekly workouts.

Another way to change the conversation is to reframe the debate before it happens. That’s exactly what Facebook did when it started building a massive energy-consuming data center in the Oregon desert. Since Oregon had long been the heart of the environmental movement, Facebook’s PR team dodged a publicity disaster by spreading information about the project’s efficient use of energy.

That gets us to another important point: Both corporations and individuals benefit from focusing on their strengths. So, if you and another manager are both competing for the same promotion, and he’s trying to focus attention on his division’s revenue growth, you can bet he chose that exact metric for a reason. The best strategy in this case is to shift the basis of comparison to something at which you excel.

Similarly, when the Yahoo! brand deteriorated in the early 2000s, it changed the subject by hiring a new celebrity CEO and spending billions to acquire the microblogging platform, Tumblr.

So reputation does play a part for both the individual and companies. But what can you do, check out my next post for more tips.

Check out my related post: Can companies from different industries learn from one another?

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